Banks, Marketers Feel the Effects of Privacy Legislation

RYE, NY - Banks, responding to the recent legislative focus on privacy issues, will do more segmentation and processing of their customer lists inhouse, shed some of their less important affinity partners and more closely monitor how third-party firms use their customer data, said Kenneth B. Kraetzer, vice president of CBSI, Harrison, NY, a financial services marketing firm.

Speaking at a privacy forum hosted by the Hudson Valley Direct Marketing Association at The Apawamis Club here last week, Kraetzer also said marketers need to do a better job of making sure their opt-out programs are more visible to consumers.

"The conspicuous presentation of opt-out messages is key," he said, citing the lawsuit filed earlier this year by the Minnesota attorney general against U.S. Bancorp, Minneapolis, alleging that the bank supplied confidential customer information to a third-party marketer. "More visible means of opt out might have taken some of the thunder out of the U.S. Bancorp situation."

Members of the privacy panel discussed the impact of various privacy-related legislative initiatives on various industries, including financial services, healthcare, marketing to children, teleservices and the acquisition and use of e-mail lists.

The ramifications of the U.S. Bancorp case, which the bank settled for payments of about $3 million, will continue to ripple through the financial services industry, Kraetzer said, and touch on those companies that have marketing partnerships with banks, including credit card marketers, insurance providers and data processors.

"I think the No. 1 reaction is going to be closer monitoring of programs and suppliers," he said. "Some banks are reviewing the priority of their programs, and some programs have been suspended. The key is to have proper setup of list management procedures and to supervise the implementation very closely."

Kraetzer suggested that bank attorneys should review all telemarketing scripts before they are approved and noted that telemarketers should be trained to listen as well as pitch so they make sure they answer customers' questions fairly and accurately. "This is particularly important when you're marketing to older consumers," he said.

He also said that some of the data processing services that banks use to segment their customer lists would be brought inhouse to minimize the chance that confidentiality could be breached.

H.R. 10 and S. 900, the financial reform bills that are being reconciled in Congress, will only add to the layers of privacy protection granted consumers, he said, causing banks "to have a much higher standard of customer privacy" as they essentially become holding companies offering both banking and insurance services.

Providers of outsourced telemarketing also are feeling the effects of the Minnesota case and other state-level initiatives, according to Jeffrey Millburg, president of Telemarketing Concepts, Yorktown Heights, NY.

"The government is just going to drive up the cost of using the channel," he said, noting that in addition to the 2.7-million-name do-not-call list that the DMA maintains, telemarketing companies also must purchase do-not-call lists from states that maintain them because of recent legislative mandates. "Unfortunately, the individual states are becoming more aggressive, and it's going to influence how telemarketing is going to be used, at least in the short term."

Direct marketers of healthcare products should be ready for legislative activity related to the use of healthcare information on the Internet, said Susan McNamara, account manager at SK&A Information Services Inc., Tarrytown, NY.

"The issue of privacy going forward, I think, is going to have to do with the use of electronic medical records," she said. "We as marketers are gatekeepers of this information and we have to be very careful about how we use it."

Michelle Feit, president of e-PostDirect, Pearl River, NY, said direct marketers need to maintain tight control of their opt-out processes as they gather and use lists of e-mail names in order to avoid the wrath of legislators.